It is a good thing that Hungary's insurance sector is dominated by subsidiaries of large regional and global multinationals that have large balance sheets, ready access to global capital markets, international brands, ability to develop innovative products and – perhaps most importantly – the ability to take the long view. If it were not an integral part of the EU economy, it is possible that some of the players might rethink their commitment to the market – if only because they could easily see more attractive opportunities elsewhere.

In the life segment, a problem appears to be that life insurance does not appear to have caught the imagination of households that can afford to use it. Hungary is emphatically not a rich country where the government can be expected to provide universal and generous retirement incomes (unlike Slovenia, for example) and other benefits that
are normally sourced from the insurance sector. In local currency terms, life density has been falling over recent years. BMI also accepts that some households have stopped using life insurance as a result of more difficult personal circumstances. The latest results from ING, Allianz, Generali and other majors indicate that H111 was a lacklustre but not disastrous period for life insurers.

In theory, the life market could grow quickly if the majors deliver the right products (a lesson from the Czech Republic in recent months). In practice, it appears that the constraints on the development of life insurance are having a depressing impact on the evolution of premiums for the time being.For non-life companies, the environment is grim. In mid-August 2011, the Association of Hungarian Insurance Companies (MABISZ) said Hungary's non-life premiums fell from HUF215bn in H110 to HUF206bn in H111. The main problem appears to be price competition in auto-related lines. However, it also appears that overall marketing and other costs (if not losses) have been rising. If Allianz's H111 earnings are any guide, Hungary is a rare market in the region where non-life combined ratios have been rising. BMI expect non-life premiums to achieve single-digit growth in 2011. It may well be that BMI have to cut our projections in the coming months.
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